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Top earners face income tax rise Top earners face income tax rise
(30 minutes later)
Chancellor Alistair Darling is to announce in his pre-Budget report he intends to raise the top rate of income tax in the future, the BBC learns. Chancellor Alistair Darling is due to announce in his pre-Budget report he intends to raise the top rate of income tax in the future, the BBC learns.
BBC political editor Nick Robinson said the move would break a Labour pledge held ever since Tony Blair came to power in the 1997 election.BBC political editor Nick Robinson said the move would break a Labour pledge held ever since Tony Blair came to power in the 1997 election.
He said sources suggested that after the next election a new 45p rate could apply to incomes above £150,000 a year.He said sources suggested that after the next election a new 45p rate could apply to incomes above £150,000 a year.
The government has not confirmed any of the details.The government has not confirmed any of the details.
'Symbolic significance''Symbolic significance'
Mr Robinson said the pledge not to raise either the basic or top rate of tax was repeated in the party's 2005 manifesto.Mr Robinson said the pledge not to raise either the basic or top rate of tax was repeated in the party's 2005 manifesto.
He said he understood a top rate increase would be delayed until after the next election, possibly in 2010.He said he understood a top rate increase would be delayed until after the next election, possibly in 2010.
This would allow Labour, if it wins the election, to claim it has not broken its 2005 promise and it had a new electoral mandate, he said.This would allow Labour, if it wins the election, to claim it has not broken its 2005 promise and it had a new electoral mandate, he said.
He described a rise in higher earners' income tax as of "huge symbolic significance", but stressed it would only raise a fraction of the sum needed to get the public finances back in order.He described a rise in higher earners' income tax as of "huge symbolic significance", but stressed it would only raise a fraction of the sum needed to get the public finances back in order.
It is unclear how much a new tax rate could raise, but a Treasury answer to a Parliamentary question in 2006 suggested a 45% rate on people earning above £150,000 would have raised £1.2bn. It is unclear how much a new tax rate could raise, but a Treasury answer to a Parliamentary question in 2006 suggested a 45% rate on people earning more than £150,000 would have raised £1.2bn.
There has been much speculation about the specific details of Mr Darling's pre-Budget report, to be unveiled on Monday.There has been much speculation about the specific details of Mr Darling's pre-Budget report, to be unveiled on Monday.
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However, it is expected he will announce short-term tax breaks to stimulate the economy including a temporary cut in VAT from 17.5% to 15%.However, it is expected he will announce short-term tax breaks to stimulate the economy including a temporary cut in VAT from 17.5% to 15%.
The prime minister has so far refused to confirm a VAT cut, but did say there would be "substantial" measures to pump money into the economy.The prime minister has so far refused to confirm a VAT cut, but did say there would be "substantial" measures to pump money into the economy.
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Tory leader David Cameron has warned the government's plans will lead to a future "tax bombshell".Tory leader David Cameron has warned the government's plans will lead to a future "tax bombshell".
Experts say the government will have to increase borrowing to record levels of £100bn or more, which the country will have to pay back later in higher taxes - and there is no guarantee tax cuts will get consumers spending again.Experts say the government will have to increase borrowing to record levels of £100bn or more, which the country will have to pay back later in higher taxes - and there is no guarantee tax cuts will get consumers spending again.
'Backward step'
News of an income tax rise is being met with mixed reactions.News of an income tax rise is being met with mixed reactions.
The Taxpayers' Alliance chief executive Matthew Elliott described the move as "a totally backward step". The Taxpayers' Alliance described the move as "a totally backward step".
"To recover from the recession, Britain needs to be a low tax, competitive economy, not one that punishes success," he said. Its chief executive Matthew Elliott said: "To recover from the recession, Britain needs to be a low tax, competitive economy, not one that punishes success.
"The government's strategy risks hobbling the economy even more and scaring off potential investors when we need them most.""The government's strategy risks hobbling the economy even more and scaring off potential investors when we need them most."
'Fairness prevails'
Conservative MP Michael Fallon warned the change could drive businesses out of the UK.
"We want Britain to be an attractive country for people to come and do business in and for the last 15, 20 years there's been a consensus that you shouldn't increase the top rate too much.
"Now that's all been broken tonight," he told BBC's Radio 5 Live.
But the Labour chairman of the Treasury select committee, John McFall, said it showed the government was listening to people's concerns about inequalities in the tax system.But the Labour chairman of the Treasury select committee, John McFall, said it showed the government was listening to people's concerns about inequalities in the tax system.
He said hard-working and middle-class people have felt their income strained and a lack of fairness in the tax system, particularly with "people making hundreds of millions of pounds paying less tax than the ordinary person".He said hard-working and middle-class people have felt their income strained and a lack of fairness in the tax system, particularly with "people making hundreds of millions of pounds paying less tax than the ordinary person".
"So they're saying, come on, let's look at this thing again, fairness must prevail here. And I think that that argument is maybe getting through to Alistair Darling.""So they're saying, come on, let's look at this thing again, fairness must prevail here. And I think that that argument is maybe getting through to Alistair Darling."
Liberal Democrat Treasury spokesman Vince Cable said now the government has realised the tax system is unfair, ministers should focus on closing loopholes and removing tax advantages that the richest currently enjoy.
"The avoidance opportunities and reliefs become even more important if a higher tax rate is introduced," he added.
But he warned that by itself an increased tax rate on those earning more than £150,000 would only raise "negligible amounts" of additional revenue.